Next Move - Bounced Cheque - Time Waster

[twix]

Hello
I am looking for some advice.

We have recently started selling to trade, and unfortunatly a new customer has given us the complete run around.

Basically as he was a new customer (sole trader) he wanted a huge order on credit, to which we refused, only giving him £500 and insisting he paid up front for the 1st few orders.

The 1st order he paid straight away using his girlfriends credit card (small order of £100) the next order he wanted straight away as he said he had customers waiting for goods (£300 order) and promised payment via credit card later that day when he got back to his office and could we send a further order out to arrive the next day value £600 as we were going away on holiday for 4 days, which we did.

He never rang that night but phoned 1st thing next morning to tell us that his secretary had sent us a cheque to cover the £900 invoices owed to us.

The cheque duly arrived the next day and was banked that day. The following week he requested that we send a further £520 of stock, as effectively we had the cheque and was showing as received in our account we sent the stock out.

The next day on logging into our bank account we found that the cheque he had sent for £900 had bounced.
I immediatly phoned him- and he gave excuses saying that tens of thousands of ££ had gone in, so the cheque should't have bounced - blah - blah. He gave me £200 off a different credit card and would settle the remaining balance the next day as he couldnt then as a member of staff had the main business card so he had to wait until they came back, so i phoned him the next morning , where upon he said he would phone at midday as he wasnt in the office, at midday he couldn't pay as he had a customer and promised to ring straight back. At 4pm i left an angry message saying that i was losing patience, next morning he rang to tell me that he didnt like 'our attitude' and was sending the goods back (most of the stock was already past the 5 days return date that is on our TOS) so I wasn't even sure what he wanted to send back
I just said ok fine, next morning (thurs) i phone again to ask when the goods would be delivered - as we were away from fri am for the weekend.
He told me that they would be with me by 4pm that day, so we waited in all day. at 3.40pm he said they would be with us within an hour, so we kept our premises open and waited until 8.30pm for him to arrive. he never did.
next morning he rang to say that he had to get a B&B for the night, I eplained to him, that we would be here only until 10am, after that we were closed.
I told him there was no where secure to leave the stock, at that point he put the phone down on me.

That was the last Ive heard from him...

Saturday morning I received the bounced £900 cheque back from the bank with Refer To Drawer on it -
his total balance that he now owes us is £1200.

I have read up about bounced cheques and understand that as its illegal to send a cheque without sufficiant funds - direct action can be taken against the debtor.

As I know that what comes out of his mouth is hot air, Im going to have fight him to get the debt paid.

I would really like some advice as to what to do next.

1) should i re - present the cheque and see if the bank will cash it ?
2) As the cheque amount was over £750 I can do a creditor's petition - ie I can petition for the debtor to be made bankrupt (bit harsh this one)
3) Wait 20 more days and reinvoice for the total amount adding the interest from the bounced cheque ?
4) go through the small claims service

what would you do ?
Really fed up with this person giving us the run around

 

[Phil B]

DO NOT USE THE winding up/bankruptcy option at this stage. The courts get understandably arsey about this process being used as a credit control function – exhaust all other credit control options first.

If you do eventually have to go through the Winding up/Bankruptcy option then you are extremely unlikely to receive anything in terms of what you are owed.

Re-presenting the cheque will result in a charge when it bounces again (as it almost certainly will).

I would personally take a deep breath and accept that you have been ripped off. Then send a seven day letter and immediately issue the Claim in the Small Claims Service (it is likely that the fee is more good money thrown after bad).

Sit back and wait for him not to respond and accept judgement and ultimately nothing!

It is worth hanging onto the Judgement and allowing the interest to accumulate as a client of mine last year received £23,000 on a £7,000 judgement that dated back years!

A point for the future – a cheque is not cleared funds – neither is a bankers draft.

Phil B

 

[Geoff T]

a few things here:

1. I'm sure - and stand to be corrected - that a cheque with "Refer to Drawer" on it cannot be re-presented

2. Agree with Phil B - court wouldn't look kindly on a bankruptcy petition at this stage...

3. you've still got to find out why this guy won't pay...you admit you've already lost your temper...I suggest you get someone to intervene on a 3rd party basis...

4. you're looking for/expecting a fight - that won't help you get your money!

for cost-effective option (which I know will cost less than going to court!) - get in touch with GRDCredit...PM through members list...

Phil B was right on another point though - you need to clam down, and make a rational decision!

 

[twix]

1) I don't think the cheque can be re presented either though i might seek advice from my bank on this one....

2) No I agree with this one - seems a bit extreme !!

3) I never lost my temper, just said that "i'm beginning to get annoyed", after phoning many times.
Don't know why they are giving me the run around, they wanted the product, just wanted it free.

4) I wasn't looking or expecting a fight, I send everything out in good faith, and it annoys me when people take advantage of our good nature

5) thanks - I will pm GRD - as I understand even if I get judgement i might not get the money....
How I love the legal system !

 

[Phil B]

May be worth asking a debt collection mob to have a go, depending on your T’s & C’s they can bring the added pressure that can get things moving.

Gemini Debt recovery will often have a crack on a commission only basis and they have sorted out a couple of issues for me in the past – worth a crack.

 

[Geoff T]

Phil B - sorry, you're never going to persuade me a DCA would be a viable option!

 

[GRDCredit]

Did somebody call? For my part I would recommend Geoff T. There, that's the formalities out the way!

One good thing is you are jumping on this one nice and early, always gives the best chance of getting paid.

I am not sure of the rules about representing a cheque but give it a go - there will be charges but they won't be yours!

"I have read up about bounced cheques and understand that as its illegal to send a cheque without sufficiant funds - direct action can be taken against the debtor."

It is an offence under, if I recall correctly, the Theft Act to issue a cheque in the knowledge that there are insufficient funds to cover it - direct action can be taken against the debtor but far better to think of ways of getting your money back

"3) Wait 20 more days and reinvoice for the total amount adding the interest from the bounced cheque ?"

Why do you feel the need to wait 20 days?

Personally I think it is too early for a debt collection firm (but then I would, wouldn't I!)

I would agree with the others that you need to be able to show all other avenues have been exhausted before going for bankruptcy so either instruct a third party or write and give 5 days to pay the entire balance in full failing which you will etc....

If I were you I would also be inclined to avoid telephone contact as you need to avoid getting into an argument and remain professional at all times and - understandably - I can see you getting into verbal blows with this guy if you are not careful!


Geoff

 

[Geoff T]

1) I don't think the cheque can be re presented either though i might seek advice from my bank on this one....

2) No I agree with this one - seems a bit extreme !!

3) I never lost my temper, just said that "i'm beginning to get annoyed", after phoning many times.
Don't know why they are giving me the run around, they wanted the product, just wanted it free.

4) I wasn't looking or expecting a fight, I send everything out in good faith, and it annoys me when people take advantage of our good nature

5) thanks - I will pm GRD - as I understand even if I get judgement i might not get the money....
How I love the legal system !

3) sorry, just that your post read that way - and the point here is that you don't know the real reason why the guy isn't paying...that's where someone like GRD can help

4) - annoyed see - you need someone to deal, so you can take a "step back"...!

5) - you forgot to exclaim about the expense - and delay - too!

 

[Geoff T]

I am not sure of the rules about representing a cheque but give it a go - there will be charges but they won't be yours!

"I have read up about bounced cheques and understand that as its illegal to send a cheque without sufficiant funds - direct action can be taken against the debtor."

It is an offence under, if I recall correctly, the Theft Act to issue a cheque in the knowledge that there are insufficient funds to cover it - direct action can be taken against the debtor but far better to think of ways of getting your money back

thought it was the Cheques Act 188(something)!

 

[Geoff T]

ps - OP - sorry (Sunday thing!) forgot to mention you don't need to re-invoice to add in interest on amount owed...others will call it "the debt"...

you just add it on (if this ever gets to court), on a separate line on the claim form...

 

[twix]

Why do you feel the need to wait 20 days?

Your right I dont need to - I didnt agree 30 day terms

Terms of Business
For orders over £100 *** will require payment on a Pro-Forma basis.
Until a good relationship has been forged between *** and the customer a credit limit of £500 will be imposed. When this limit has been reached no further goods will be sent until payment is received in full.
Once we have established a working relationship *** will review and extend your credit limit.

we only sent out more goods as we had the cheque
(Would never have believed it would have bounced - otherwise wouldn't have sent the other stock out)
Still we are new in business - gotta toughen up I guess - and not be so trusting. the dog eat dog world out there and all that
At least its a lesson I can learn from !

does the invoice need any special wording on it ?

your help is greatly appreciated

 

[Phil B]

Never looking to persuade anyone of anything Geoff T – except that Leicester Tigers are simply beyond question the best rugby team on the planet – but that may not be relevant to this thread!

By the way you’re wrong if you believe any other team is worth supporting and I can prove this!

Forget the Theft Act when it comes to bounced cheques – yes it applies and yes it is a criminal offence to KNOWINGLY issue a cheque that won’t clear – get commercial, it is a blunt instrument and one that will waste time.

Fire a shot and then get on with life. Bad debts are invariably that – bad. Don’t waste too much time or money going after them, someone who genuinely will not pay for a genuine reason will enter into a dialogue, those from the “will pay, will pay, should pay, have paid, sorry nearly paid but” mob are worth binning.

There is a better way to structure your payments.

 

[GRDCredit]

thought it was the Cheques Act 188(something)!

Do you mean the Bill of Exhange Act 1882?

 

[maxine]

ok, so here's what I suggest

Pop along to the court and get paperwork for a debt claim (rather than do it online) and once you have written it all out along with the claim for fees and interest (special wording needed but it explains that in the pack) you can then photocopy it and enclose it with a "letter before action" saying along the lines of you have until <date> for us to receive full payment or we will issue the debt claim as it has been written out.

This usually encourages people to go and find another card (girlfriend, wife, dad, granny etc) to make a payment straight away to get you off their back.

The reality is that he probably had no source of funds to get stock to do the work and now hasn't yet been paid by his customer.

And you have every right to get annoyed on the phone if you want and this is one of the joys of chasing money for your own business rather than doing it as a job working for someone else - it is your money and you have been given the run around! However a nice but assertive conversation with perhaps the opportunity of allowing payment by instalments with say £200 being paid immediately might help to get your relationship back on track with this debtor and get paid.

If that doesn't work then go with the debt claim to get judgement and you can always get advice later on the best ways to enforce the claim.

My advice would be to not represent the cheque as it doesn't say on it "Refer to Drawer, Please represent" it just says RTD

The difference with a bounced cheque in a debt claim is that there is no chance of the debtor defending their claim as they have already written out a cheque as their intention and agreement to pay. Therefore it should be easier to collect than other debts but you do need to move fairly fast.

The Theft Act 1968 bit is a bit of a red herring as this is for a criminal offence yet people don't tend to get arrested for bouncing cheques

The other thing is don't take it too harshly - at least you had a limit in place (which is a lot more than some people) but there is normally a clue with the ones that shout the loudest or demand the stock the quickest! At least it wasn't as much as it could have been and you should feel pleased about that

Good luck

 

[GRDCredit]

Your right I dont need to - I didnt agree 30 day terms

Terms of Business
For orders over £100 *** will require payment on a Pro-Forma basis.
Until a good relationship has been forged between *** and the customer a credit limit of £500 will be imposed. When this limit has been reached no further goods will be sent until payment is received in full.
Once we have established a working relationship *** will review and extend your credit limit.

we only sent out more goods as we had the cheque
(Would never have believed it would have bounced - otherwise wouldn't have sent the other stock out)
Still we are new in business - gotta toughen up I guess - and not be so trusting. the dog eat dog world out there and all that
At least its a lesson I can learn from !

does the invoice need any special wording on it ?

your help is greatly appreciated

1) What did you have in mind? Which invoice

2) Good to hear lesson learned. If you want general credit control advice (no charge to talk!) then Geoff or I will be happy to spare you some time

3) If cheques are going to be a major part of your business consider a cheque guarantee service such as Transax. Cost might be prohibitive for a start up however

4) Who drew up your T&C? The extract above is a bit wordy (although well done for having some T&C in the first place!)

Geoff

 

[twix]

I did the T&C

when I had the original phone call from this person he was talking really big figures of the amount of stock that he wanted - at which point I said to my partner, if we send that amount of stock out and he doesn't pay - he could take us down as well, but as he is a sole trader I thought that it was less of a risk than if he was a ltd company, as at least he personally would be liable for the debt.

the t&c has been added to since, as stated it is a learning curve, and it is relatively a small amount, but still - as maxine said - its our money - not his !!

 

[Geoff T]

1) 3) If cheques are going to be a major part of your business consider a cheque guarantee service such as Transax. Cost might be prohibitive for a start up however

the easier option is to allow time for the cheque to clear...based on proforma...

give the cheque a full week to clear...then send the goods...

 

[GRDCredit]

If £1,200 is a small amount can you lend me a grand!

 

[maxine]

when I had the original phone call from this person he was talking really big figures of the amount of stock that he wanted - at which point I said to my partner, if we send that amount of stock out and he doesn't pay - he could take us down as well, but as he is a sole trader I thought that it was less of a risk than if he was a ltd company, as at least he personally would be liable for the debt.

I love you for making this post!!! It is so nice to see someone thinking about credit limits in terms of values and impact to their business and the difference between limited company versus sole trader

Whoo hoo

Sorry, I know that hasn't got your money in for you

 

[maxine]

If £1,200 is a small amount can you lend me a grand!

Don't be mean! You are missing the point. There was a credit limit of £500 in place but they just got caught out with the cheque bouncing

 

[twix]

Don't be mean! You are missing the point. There was a credit limit of £500 in place but they just got caught out with the cheque bouncing

it was our mistake for being too trusting - and it won't happen again.
although the debt is £1200 - the actual cost to us is obviously less.

Thanks enormously for all the advice.. a lesson learnt !

 

[Geoff T]

it was our mistake for being too trusting - and it won't happen again.
although the debt is £1200 - the actual cost to us is obviously less.

Thanks enormously for all the advice.. a lesson learnt !

- all you need now, to get the job done - is to get your money...

go, go, GRD!

 

[yorkshirejames]

If it were me I would actually issue a statutory demand. You don't necessarily have to follow through with bancruptcy.

 

[Deliberator]

Have you thought of visiting this fella and having a face to face chat, both you and your business partner ? Sometimes knocking on one's door has the desired effect. Unless of course he's absolutely miles away etc..

Solicitor's letter although that'll cost you approx £80 I guess just to add seriousness to it.

I'd get arsey too for £1200 so I can understand your predicament. However, by being clever and keeping your cool, you're far more likely to be able to manipulate the situation in your favour, but consider the visit !!

 

[twix]

The person lives too far away to visit, we would have met if he had bothered to turn up last week, on the day that he said that he would when bringing the stock back.

Im just finishing off the new invoice to him, telling him he has 7 days to pay, and the only way he can pay is by BACS or Cash !!
I don't trust the guy not to do a chargeback at a later date, and cheques are useless as they are rubber
Then its off to the courts I go / or contact GRD (thanks for the PM btw)

Thanks again for all the advice

 

[rubberdubber]

Ok - for an update

we sent a letter before action via recorded delivery on 18/08/09 but the tracking is still showing as sitting at our local post office (how hopeless is that - thanks royal mail !)

so I sent the same letter direct to his email address, which he confirmed that he had received.

he states he never received the letter (cant prove otherwise) and that he accepts 24th Aug as the 1st day.

the 7 working days are up tomorrow, and no money in bank - and no further contact.

Looking on the blackside (unless the money appears tomorrow - unlikely)

what is the next best course of action....

1)is it best to go to moneyclaim online
2) go to a debt collector on a no win no fee

and also is there anyone who can check for ccjs against this person to see where I stand - its a sole trader who also runs another business (not ltd)

Many Thanks

 

[Lime One]

The court process will take another fee from you up front and eventually (maybe) you will get your money back. You may find this 'client' has a number of CCJs and you will be chasing enforcement of the county court judgment for some time. Go initially with the debt collection route and see what transpires, it will not prevent you using the court route if the debt collection route does't work.

Threatening bankruptcy and issuing a statutory demand is one thing but the fees for a bankruptcy petition and subsequent court hearing will exceed the value of this claim.